The name of your company plays a big role in your success. But, for many small businesses, legal structure limits what a business can be called. To use a name that interests consumers, you might need to register a doing business as (DBA) name. What is a DBA name?
DBA name meaning
DBA is an abbreviation for “doing business as.” A DBA is also called a trade or fictitious name. It refers to a name that is different from a business’s legal name. Many businesses operate under a DBA name rather than their legal name.
A fictitious name offers many advantages to a small business owner. Using a DBA:
- Shows who is behind a company because the registration requirements create a record. This offers consumers some protection by making the organization’s contact information available
- Gives the opportunity for LLCs and corporations to pursue multiple business ventures and create separate identities for each
- Makes it easier for sole proprietorships and partnerships to open business bank accounts
The name of your business is an important part of building brand awareness. You might need a straightforward name that clarifies what your business offers. Or, you might need to be called something creative to intrigue consumers. Whatever your branding needs are, a DBA could be a smart solution.
What’s in a name? Legal business name vs. DBA
The name of your business has a big impact on attracting customers and complying with laws. As a small business owner, you need to know the difference between a legal business name and DBA.
Legal business name
A legal business name is the name of the person or entity that owns the company. The way a legal name is determined varies depending on your type of business structure:
Sole proprietorships: When you register your business, the legal name is automatically the same as your name. So, if your name is John Smith, your business’s name is John Smith.
Some states allow sole proprietors to use their name and a description of their offerings without a DBA. For example, if John Smith is an electrician, the legal name could be John Smith’s Electrical. Check to see if your state requires a DBA for this situation.
Partnerships: The legal name of the business is stated in the partnership agreement. In many states, the legal name of a partnership is similar to a sole proprietorship and must be the last names of the partners. For example, if the last names of partners are Wilson and Roberts, the legal name of the business is Wilson and Roberts.
LLCs and corporations: The legal business name is chosen and declared in the company’s state business registration. Usually, the name of an LLC or C Corp must have a legal ending (e.g., LLC or Inc.).
When you need to use a legal business name
Even if you have a DBA, some situations require you to use the legal business name. You must use the legal name to file official or government-related forms.
Think of your business name as the name of a person. Let’s say your name is James, but everyone calls you Jimmy. “James” is the name that appears on your birth certificate, driver’s license, and Social Security card. You use “James” on your personal tax return. Treat formal business communications the same way, using the legal name on your business tax returns, property leases, and checks.
When a DBA is needed
A DBA is used for advertising and sales purposes. You can find a business’s doing business as name on signs, packaging, and the internet. It’s usually shorter and easier to remember than the legal business name. This helps create brand awareness that would be difficult with the full legal name.
For example, the legal name of McDonald’s is “McDonald’s Corporation.” With a DBA, business owners can exclude legal endings. By removing “Corporation,” the name becomes more concise, memorable, and easier to say.
You might be wondering, Is a trade name the same as a DBA? The answer is yes. Trade name and DBA can be used interchangeably. In fact, a trade name can also be a trademark. But, by itself, a DBA is not intellectual property. To protect your doing business as name, you might want to register it as a trademark.
How to get a DBA
You must fill out a doing business as form and register with your state when setting up a DBA. DBA registration means making a legal announcement that your company will operate under an assumed name. The name differs from the official name of your organization as well as the names of investors and owners.
The first step of learning how to set up a dba is filing a legal document with the state you operate in. The DBA application contains information such as the fictitious name you want, the business description and legal name, and the names and addresses of all owners. Other information may also be required, depending on the state and type of business entity.
You might need to fulfill additional requirements when filing a DBA name. The U.S. Small Business Administration provides a list of each state’s DBA requirements. Once you are registered, you will receive a fictitious name certificate.
Difference between DBA and LLC
As you set up your business, you might be confused about the difference between DBA and LLC. Both are acronyms associated with business, but each serves its own purpose for your company.
LLC (limited liability company) refers to a separate legal entity from business owners. By registering an LLC, you gain personal liability protection over your personal assets. If the business is unable to pay debts, you are not held personally responsible for those liabilities. A DBA does not offer liability protection.
The name of an LLC is the business’s legal name. “LLC” must be used on all official and government forms. For example, you must use the LLC name on your business tax return and business registrations. You cannot use the DBA name on legal forms for an LLC.
Usually, if you want to use a name other than your business’s legal name, you must file a DBA with your state. But, the state never requires you to form an LLC. It is your choice as a business owner to register as an LLC.
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This article is updated from its original publication date of July 24, 2012.This is not intended as legal advice; for more information, please click here.